A twice-weekly syndicated newspaper column on California public affairs.

Wednesday, June 3, 2015

GASOLINE PRICE GOUGING EVIDENCE GROWS

CALIFORNIA FOCUS
FOR RELEASE: TUESDAY, JUNE 16, 2015, OR THEREAFTER

BY THOMAS D. ELIAS
“GASOLINE PRICE GOUGING EVIDENCE
GROWS”

Just
about two years ago, when gasoline prices in most of California last moved well
above the $4-per-gallon level, crude oil cost $147 a barrel. Oil companies said
the high price of crude was a major factor in that price spike.

This
spring, when gas pump prices again jumped above $4 in many places, crude oil
fell under $50 per barrel for awhile before recovering a bit to around $60 near
the end of May.

So it’s no wonder consumer advocates
rail at gasoline prices, which are back near peak levels after a late-winter
respite. In fact, evidence is mounting that prices in this state are being set
to gouge consumers, even though there is no certainty of collusion between the
four companies controlling almost 80 percent of the state’s gasoline
production.

Also
pointing toward gouging is the fact that oil companies repeatedly claim gas
refinery outages are big factors in California price spikes. When fire hit a
non-operational fluid catalytic cracking unit at Exxon’s refinery in the Los
Angeles suburb of Torrance, prices rose all over California, yet the burned
part of the plant was doing nothing.

Another statewide rise came when there
was a labor problem at Tesoro’s refinery in Martinez, east of San Francisco,
which has long been unreliable. But there’s no rationale for a refinery
problems in Southern California to affect prices in Northern California, or
vice versa.

Says a retired 32-year engineer at
Valero’s refinery in Benicia, “The pipelines that leave Bay Area refineries do
not connect with the pipelines in Southern California.” In short, the fact
there may be a shortage for awhile in one part of the state doesn’t mean there
will be one in the other large region. A comprehensive Kinder-Morgan Energy
Partners map of the state’s gasoline pipelines confirms a lack of linkage
between north and south. So while a refinery outage in one half of California
might create a bit of a shortage there, it should not affect the other half.

But shortages in one area invariably
raise prices around the whole state.

Those two peculiarities definitely
suggest gouging. There are also the springtime statements of major oil company
executives to their stockholders and financial analysts.

Said Greg Maxwell, chief financial
officer of Phillips 66, “First quarter gasoline cracks (the difference between
the price paid for crude oil and the price of petroleum products made from it,
including gasoline) for the Western Pacific region were $20.21 per barrel
compared with $7.46 last quarter, resulting in record earnings for the region.”

Reported a top Chevron official,
“Margins increased earnings by $435 million driven by unplanned industry
downtime and tight product supply on the West Coast.”

And Tesoro chief executive Gregory
Goff said, “In California, crack spreads have improved… There’s no question
that during the first quarter with what happened to Tesoro (which sells under
the Shell and USA labels, among others) as a result of the (labor) disruption
at the Martinez refinery…it was very supportive to the margin environment there.”

In short, when the companies produced
less gasoline and charged more for it, their profits soared. So they had no
incentive to delay planned maintenance outages at some refineries when
unplanned disruptions shut down others. One result of all this was that
Californians in late May were paying an average of $1.30 more per gallon for
gasoline than drivers in other states. Only about 15 cents of that could be
ascribed to the state’s higher gas taxes.

Spokesmen for the Western Oil and Gas
Association did not return calls seeking comment.

All this led the Consumer Watchdog
advocacy group to call for a federal Justice Department investigation of
possible price gouging.

Said the group’s president, Jamie
Court, “Since the beginning of February, California’s 14 oil refineries have
suffered 10 serious slowdowns or shutdowns. This is the only industry in
America that profits more when its factories repeatedly break down. Since four
oil refiners control 78 percent of the gasoline market, such an oligopoly can
easily withhold needed products to drive up prices.”

Put it all together and it’s clear
gasoline prices here are far higher than they ought to be. Whether or not
that’s a criminal matter has yet to be determined.

-30-
Elias is author of the current book “The Burzynski
Breakthrough: The Most Promising Cancer Treatment and the Government's Campaign
to Squelch It,” now available in an updated third edition. His email address is
tdelias@aol.com

No comments:

Post a Comment

About Me

Thomas Elias writes the syndicated California Focus column, appearing twice weekly in 88 newspapers around California, with circulation over 2.2 million.
He has won numerous awards from organizations like the National Headliners Club, the California Newspaper Publishers Association, the Los Angeles Press Club, and the California Taxpayers Association. He has been nominated three times for the Pulitzer Prize in distinguished commentary.
Elias is the author of two books, "The Burzynski Breakthrough: The Most Promising Cancer Treatment and the Government's Campaign to Squelch It" (now in its third edition; also published in Japanese and recently optioned for a television movie) and "The Simpson Trial in Black and White," co-authored with the late Dennis Schatzman.